Thai automotive industry under threat amid political uncertainty and loan concerns

The Thai automotive industry is under threat due to a potential delay in forming a new government, following a marked decline in domestic car sales in the first half of this year.

As noted by Toyota Motor Thailand, the ongoing political uncertainty is likely to postpone car purchases from potential customers both domestically and in the business sector. Individuals and companies alike are keen to first understand the economic policies of the prospective coalition government before committing to major purchases.

This issue compounds the already depressed sale of cars, a result of financial institutions implementing stricter criteria for granting loans to car buyers due to concerns surrounding rising interest rates and high household debt, which currently sits at 90% of GDP.

This, coupled with the unpredictable state of Thailand‘s economy, is projected to negatively impact the automotive industry in the latter half of 2023, according to Noriaki Yamashita, President of Toyota Motor Thailand.

“These factors not only affect business operations but also undermine consumers’ confidence in the Thai economy,” adding that the car demand issue will be among the challenges facing Thailand’s automotive industry this year.

Earlier this year, Thailand noted a 5% year-on-year drop in domestic car sales, which fell to 406,131 units from January to June as reported by the Federation of Thai Industries, reported Bangkok Post.

Despite the detrimental circumstances, Toyota’s sales in Thailand staggered a minor 3.6% year-on-year dip with 136,859 units sold in the first six months, solidifying the company’s market leadership stance at 33.7%.

Remarkably, despite the domestic slip, the car manufacturing giant recorded a 10% year-on-year growth in car exports within the same timeframe, exporting 190,491 units.

For this year Yamashita projects Thailand’s total car sales to hit 855,000 cars, a slight 0.7% rise from the previous year.

Toyota maintains a domestic sales target of 291,000 units in 2023, a marginally higher figure by 0.8% from the previous year.

In further good news, multiple positive influences are being credited for this projected increase including the revival of Thai tourism, increased investments within the country, the launch of new car models, and impactful marketing campaigns.

Car manufacturers, including Toyota, stimulated sales in the first half of the year through impressive new car designs, pushing technological boundaries, and aggressive sales campaigns.

However, despite the promising performance in exports recorded in the initial six months of 2023, the company remains wary of factors such as an impending global economic slowdown that could potentially impact purchasing power in the markets of Toyota’s key trading partners this year.